Millennials are open to fee-based loyalty schemes

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By: Wise Marketer Staff |

Posted on July 15, 2015

Any consumer who cringes at the idea of paying a fee to join a customer loyalty programme is probably not a Millennial, according to a LoyaltyOne survey of 1,005 US consumers which found that those aged 18-35 were significantly more open-minded about investing in a loyalty programme membership than the rest of the population.

The survey was conducted against a backdrop of high-profile marketplace developments, such as Wal-Mart disclosing details of its US$50 per-year fee-based delivery programme called 'Shipping Pass', which is widely seen as a challenge to Amazon Prime with its US$99 per-year fee. And at the same time, announced its own membership-based shopping club promising low prices at a US$49.99 annual fee.

The study found that 62% of all consumers said they'd consider joining a fee-based rewards programme if their favourite retailer offered one. This number was even higher among millennials with 75% of 18-24 year-olds and 77% of 25-34 year-olds saying they'd consider joining a fee-based rewards programme.

Two out of three (65%) said customer rewards are worth paying for if they are relevant to their needs. Millennials, again, rated this even higher with 79% of 18-24 year-olds and 76% of 25-34 year-olds saying relevant rewards are worth paying for.

Nearly half (47%) said rewards in fee-based programmes are better than rewards in free programmes. A significantly larger number of millennials - 61% of 18-24 year-olds and 54% of 25-34 year-olds - said fee-based rewards are better.

"These results should attract the attention of brands considering a shift to fee-based loyalty programmes as marketers look for ways to create competitive differences and lock in customer spend against a backdrop of waning programme effectiveness and engagement challenges," said LoyaltyOne consulting associate partner, Lance Du Chateau.

The survey found that 49% of overall respondents said all rewards programmes seem alike. The perception of programme sameness was even stronger among millennials, where the scores were 57% for 18-24 year-olds and 52% for 25-34 year-olds.

"Brands have historically hesitated to explore new loyalty strategies because traditional programmes were still novel in most spaces. However this hasn't been true for years. The perception that only a small minority shoppers will 'pay to play' is also a dated viewpoint," added Du Chateau. "42% of consumers surveyed have already paid to join a programme and 62% of respondents said they'd consider joining a fee-based rewards programme if their favorite retailer offered one."

Among the key findings of the study:

  • Of the respondents who already participate in fee-based loyalty programmes, 69% said they were enticed by free shipping, followed closely by special discounts at 67%.
  • Women (67%) are slightly stronger than men (64%) in their belief that rewards are worth paying for.
  • When asked which category would be most appealing if compelling benefits were available through a fee-based programme, respondents ranked Grocery and Mass merchandise highest (35%), followed by Credit Card rewards (26%), Specialty Retail (13%), Travel (18%) and Restaurants (9%).
  • 32% of 18-24 year-olds and 34% of 25-34 year-olds said they have never been offered membership in a fee-based programme, versus 25% of the general population.

"The traditional spend-earn-redeem reward programme doesn't make sense for all companies and customers, and fee-based value propositions increasingly are a topic of conversation," concluded Du Chateau. "More marketers should explore this approach."

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